AER agrees to the publication of this response to the consultation of the European Commission on the Review of existing legislation on VAT reduced rates.

On October 8th, 2012, the European Commission published a consultation paper on the Review of existing legislation on VAT reduced rates (VAT consultation). AER welcomes this publication.

AER will focus its comments on questions 6 and 9 of this consultation.

The radio sector consists in a myriad of small and medium sized enterprises. Moreover, on-air broadcasting radios reach massive audience on a daily basis in all EU Member States: approximately 80% of the EU population on average listens to radio for at least 2 or 3 hours per day, as shown by national audience measurement. Commercially funded radios indeed constitute a unique network of small and medium-sized enterprises (SMEs), contributing to cultural diversity, media pluralism, access to creativity, social inclusion and disaster relief.

They indeed offer free-to-air services of general interest:
– they evolve in highly competitive environments
– their programmes encompass, broadly speaking, all possible formats, from debates to music-only
– As for the music broadcast, within one market, as soon as there is demand expressed, it has to be fulfilled; so, most of the musical expressions are represented
– most of them are non-politically affiliated, and certainly keep the freedom to express their opinion or to participate to the public expression of the opinions of their listeners
– their audiences are local, regional, or national
– they strive to develop on all possible platforms
– during natural, major or minor disasters, radio is one of the first tool to inform the public

Radio is the most intimate medium, and has been so for the past 50 years at least: it is indeed ubiquitous, mobile, simple-to-use and free-to-air. All these features enable our audience to cultivate a personal relationship with our programmes, our DJs, our hosts, and our brands. Our listeners thereby access programming they enjoy, and useful information .

While radio’s business model in Europe is based, now and for the foreseeable future, mainly on FM broadcasting of free-to-air programmes, digital technology (be it online or broadcast / on-air) is radio’s future. With changing consumption models, radios have to develop their presence on all possible platforms: in order to maintain its audience, radios should be accessible on-air, online, via cable or satellite transmission in a linear and non-linear manner. However, the nature of the platform does not affect the nature of the content / objectives delivered by radio programmes: local programming key for cultural diversity, media pluralism, access to creativity, social inclusion and disaster relief.

The European Commission rightly points in the VAT consultation, that “Similar goods and services should be subject to the same VAT rate and progress in technology should be taken into account in this respect, so that the challenge of convergence between the on-line and the physical environment is addressed” .

AER therefore supports the adoption of similar reduced VAT rate for radio programmes online and on-air.

Regarding more specifically question 6: “Do you agree that those electronic services that would qualify for the reduced rate will have to be precisely defined in a uniform way at an EU level or do you consider that a broad definition in the VAT Directive would be sufficient?”

As mentioned above, European commercial radio is mostly targeted at local, regional or national audiences; language barriers mean that demand is primarily limited to national, and often regional, boundaries. Moreover, in most cases, due to the traditional radio business model, the majority of AER members’ audiences are most likely limited to town and city boundaries. At the same time, by its nature, the internet gives worldwide access. As explained, the current business model for ‘traditional’ radio stations, especially commercially funded stations, does not support worldwide audiences: our programmes – be it news or music, would have little, if any, interest for listeners (or indeed advertisers) located outside a certain territorial range. Therefore, there is currently no significant financial benefit to be heard on a global scale. It follows that there is little imperative to incur the costs and time involved in securing rights for international simulcasting. However, as mentioned above, radios have to develop their presence online to address their listeners’ expectations, but, even then, remain local, regional or national players. Therefore the radio service remains mainly national at the most and radios would not be affected by the modification of the rule establishing the tax rate.

AER therefore believes that radio services do not need a precise and uniform definition at EU level.

Regarding question 9: “Are the definitions laid down in the Audiovisual Media Services Directive sufficiently clear were a reduced VAT rate allowed for on-line radio and television broadcasting?”

The Audiovisual Media Services Directive excludes radio programmes from its scope . Indeed, as mentioned above, radios are local, regional or national actors, and are highly regulated at these levels.

So the definitions set in the Audiovisual Media Services Directive do not apply to radio programmes, as they are unnecessary for the radio sector.

AER believes that Annex III point (8) of the future Directive on the common system of value added tax, should be replaced by the following:

“(8) reception of radio services, including on-demand radio services, and audiovisual media services”

AER remains available to explain this position in further details, should this be helpful to the European Commission.